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Stock Market News For Sep 21, 2017

Markets closed mostly higher on Wednesday after the Federal Reserve announced trimming of its balance sheet from October. The Fed also decided to keep the benchmark interest rates unchanged, but, indicated a possible rate hike in December. Such statements led to gains for financial shares and also boded well for banks.

The Dow hit fresh record on Wednesday, rising 41.79 points, buoyed by gains in McDonald’s (MCD - Free Report) and Pfizer (PFE - Free Report) , which gained 1.6% and 1.5% respectively. Meanwhile, the S&P 500 also ended above the 2500 level yet again and briefly hit an intraday high of 2,508.85. Of the 11 major sectors of the S&P 500, seven ended in the green, with financials leading the advancers. Both the companies possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Dow Jones Industrial Average (DJIA) closed at 22,412.59, gaining 0.2%. The S&P 500 Index (INX) increased 0.1% to close at 2,508.24. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,456.04, decreasing 0.1%. A total of 6.7 billion shares were traded on Wednesday, higher than the last 20-session average of 6 billion shares. Advancing issues outnumbered decliners on the NYSE by 1.26-to-1 ratio. On the Nasdaq, advancers outnumbered decliners by 1.30-to-1 ratio. The CBOE VIX decreased almost 5% to close at 9.68.

Fed to Begin Unwinding its Balance Sheet from October

The Fed announced the much anticipated unwinding of its $4.5 trillion balance sheet at the Federal Reserve Open Market Committee meeting which culminated on Wednesday. The Fed plans to begin the gradual unwinding process in October and also announced that it plans to trim the assets by $10 billion each month. Fed also stated that this rate would be increased further by another $10 billion every three months to gradually reach a maximum of $50 billion a month.

Such assets consist primarily of Treasurys and mortgage-backed securities, which the Fed accumulated in the wake of the 2008 financial crisis under its quantitative easing program. This was done in a bid to keep the mortgage rates low and provide liquidity to the economy.

Fed Indicates a Possible Rate Hike in December

The Fed kept the interest- rates unchanged as expected. Currently pegged at 1% to 1.25%, the central bank announced that it expects to hike the interest rate to 1.4% by the year end. Moreover, it maintained its initial forecast for 2018, expecting to hike the benchmark interest rate to 2.1%. However, the Fed decreased its outlook for 2019 from its initial forecast in June. The Fed stated that it anticipates the interest rate to hover around 2.7% by the end of 2019, lower than the initial forecast of 2.9%.

The Fed’s interest rate projections, known as the dot-plot, indicated that there might be one rate hike in December, three more in 2018 and two further rate hikes in 2019. The CME FedWatch now estimated the possibility of a rate hike in December to 70%.

Existing home sales for the month of August came in at 5.35 million, lower than the consensus estimate of 5.46 million and hit its worst level in the last 12 months. This figure is also lower than 5.44 million units for the month of July.

Existing home sales has dropped for the fourth time in the last five months and economists commented that this was because of a paucity of available homes that can be bought.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2017. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zack Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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